‘Rate hike yet to have an impact on home loans’

In an interview, Shanti Ekambaram, whole-time director of Kotak Mahindra Bank, said that the private sector lender has not seen any reduction in home loan demand, despite the increase in interest rates. Edited excerpt:

How do you plan to not only add more customers through 811 (a digital bank account) but also ensure that their average savings account balance is somewhat at par with the overall bank levels?

Instead of comparing chalk and cheese, let’s compare them to digital accounts elsewhere in the market. The customers received through branches are quite different. 811’s customers are young millennials and ‘zoomers’ who are looking to open an account in as little as three minutes. Also, the receivable cost of these accounts is a fraction of the cost of the accounts that we receive physically. 811 account holders are Millennials and we are catching them young. They want different product propositions. They want pouch products and small ticket payment options for both investment as well as credit offerings. They belong to the consumption category as they are below 30 years of age. Even within these groups, we disclosed an average number for account balances. There are people with high values ​​who open 811 accounts, and we transfer them to the relevant customer relations teams.

What is the bank’s strategy on home loan?

Home loans are a great way to get salaried customers. Historically, we were acquiring customers through the savings bank route. Two-three years ago, we said, let’s open the door for customers. When interest rates and cost of funds were low, we introduced competitive rates to attract customers. You have to keep up with the market and we are still very competitive today. This continues to be a key product strategy for us today. If you are willing to give home loan to any individual 50 lakhs, you will also be happy to give them a credit card. They keep at least 2.5-3X more balance with the bank as we insist on savings account with home loan. We acquire customers through home loans and ensure that they become regular banking customers. These customers are a mix of internal and external customers that we procure from the market. About half of them are existing Kotak customers and the rest are from the open market.

As interest rates rise, are you seeing mortgage customers suspending borrowing plans?

Buying a home is an emotional decision. Right now, we are seeing demand and not seeing any decline. Builders have not raised prices as they still have inventory. The hike in rates has not affected the demand yet as these rates are still low when I bought the house about 15 years back. We are yet to see any impact on demand and any moratorium on purchases is generally linked to other factors, not interest rates. It can be property prices, jobs, transfers and is within the scope of personal decision making.

When one major bank is back in the credit card market and another is in the process of being acquired, what position would you like to see yourself in?

For the past four quarters, there has been a significant increase in credit card acquisitions. From a product perspective, we have a card for every segment. We have recently introduced Ultra HNI (High Net Worth Individuals), an ultra-premium card for White Reserve. We mainly deliver to our customers what we provide at various customer origin points, and we will soon go to the open market. Credit cards have been a customer engagement strategy, whereas home loans have been an acquisition and engagement strategy. This is another strategic business that we are investing in and will continue to do.

Given that the rupee has now touched the psychological level of 80, in what range do you see it from here?

If you look at the last two months, the Reserve Bank of India (RBI) has moved to keep the rupee around 80 or below 80 against the US dollar. The devaluation of the rupee has been mainly due to the strengthening of the dollar and not just because of India’s macro positions. Due to oil prices, India’s trade deficit has widened and due to the strengthening of US dollar and rising rates, a lot of money has gone out, but foreign direct investment has come in to balance it. Right now, the way I read RBI, around 80 seems like a stable level and if oil stabilizes at $100-105 a barrel, the rupee will be fine, unless there are other global shocks.

How is the response to the new NRI deposit rules?

We are seeing the flow coming and we will see the full extent of the response in the next few months. The swap facility made a huge difference in 2013 and that is why you saw huge amount of money flow in India. But at that time there was also a crisis, and I do not immediately see such a situation. It was a different situation and it required a different approach. If swap facility comes, it will be a big deal and you will get huge amount like last time. That said, I don’t see this happening immediately and it is up to the regulators.

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